Advanced Child Tax Credit payments from the IRS
Beginning in July 2021, the IRS began sending payments to qualifying families. A qualifying family is one that has a dependent child aged 17 (in 2021) or younger that was claimed on the 2020 tax return.
The tax payments that the IRS is sending will be direct deposited or paid by check. Each payment is 1/12th of the full amount. Please keep track how much you receive.
- The full credit amount for 2021 per child aged 6 to 17 is $3,000.
- The full credit amount for 2021 per child aged under 6 is $3,600.
Credit phase out begins:
- $75,000 single or married filing separate
- $112,500 head of household
- $150,000 married filing joint.
How will this affect your 2021 tax return? The amount received will be offset against the full qualified amount. For example: One child aged 10 would qualify for $3,000. If the advanced credit of $1,500 was received for July – December, then the credit on the tax return would be $1,500.
If you have questions, please contact our office we are happy to help! 615-750-5537.
Key Changes to the COVID-19 Economic Injury Disaster Loans Program
On September 8, 2021, the U.S. Small Business Administration (SBA) announced following key changes to the COVID-19 Economic Injury Disaster Loans (EIDL) program to make it easier for the small business communities to access the more than $150 billion in funding available for loans:
- Maximum loan cap increased from $500,000 to $2 million
- Use of funds was expanded to include payment and pre-payment of business non-federal debt incurred at any time (past or future) and payment of federal debt
- Extend the deferment period to 24 months from origination for all loans (existing loans with a less than 24-month deferment will be adjusted)
- Affiliation requirements simplified to an affiliate is a business that you control or in which you have 50% of more ownership
- Developed additional path to meet program size standards for businesses assigned a NAICS code beginning with 61, 71, 72, 213, 3121, 315, 448, 451, 481, 485, 487, 511, 512, 515, 532, or 812
- Exclusivity Period: From September 8, 2021 to October 8, 2021, the above policy changes will be applicable to applications for <$500K while applications for >$500K will not be approved and therefore receive the policy changes until October 8, 2021
- See more details on the COVID-19 September 8, 2021 Policy Changes.
Contributed by PHB staff auditor, Binh Ngo
Drew, J. (2021, September 9). SBA quadruples Covid-19 EIDL limit to $2 million. Journal of Accountancy. Retrieved September 13, 2021, from https://www.journalofaccountancy.com/news/2021/sep/sba-raises-covid-19-eidl-limit-2-million.html?utm_source=mnl%3Aalerts&utm_medium=email&utm_campaign=09Sep2021.
SBA. (2021, September 8). COVID EIDL Program Updates Effective September 8, 2021. Retrieved from https://www.sba.gov/document/support-covid-19-eidl-program-updates
Take Advantage of the Tennessee Sales Tax Holidays and Save Money
PHB is one of the premier CPA firms Nashville residents and business owners look to for advice about saving money on taxes. Well, there is one simple way you can save money on taxes in Tennessee. And you don’t even need an appointment with us to file any kind of tax form! But, of course, we are always here for you when you do need tax advice. PHB is well known for doing business taxes in Nashville and the surrounding areas.
Obviously, if you read the title of this blog, you know that we are talking about the Tennessee Sales Tax Holidays. There are three of them:
Clothing, School Supplies, and Computers – Starts one minute after midnight on Friday, July 30, 2021 and ends one minute before midnight on Sunday, August 1, 2021.
Food, Food Ingredients & Prepared Food – Starts one minute after midnight on Friday, July 30, 2021 and ends one minute before midnight on Monday, August 5, 2021.
Gun Safes & Safety Equipment – Started on July 1, 2021 and continues for 12 months until one minute before midnight on Thursday, June 30, 2022.
Some Restrictions Apply for the Tennessee Sales Tax Holidays
Items purchased from retailers in Tennessee or from online sources that deliver the items to Tennessee are eligible. However, they must be for personal use, not for business or trade. There is no limit to the quantity of items that may be purchased. But the purchase price of each of those items must be below the threshold provided in the law.
Items that Are Eligible for Tax-Free Purchase During the Tennessee Sales Tax Holidays
Below we list both the tax-exempt items and items that are not tax-exempt for each of the three tax holidays.
Clothing, School Supplies, and Computers – July 30 – August 1, 2021
- Exempt: General apparel that costs $100 or less per item, such as shirts, pants, socks, shoes, dresses, etc.
- Not exempt: Apparel items priced at more than $100; Items sold together, such as shoes, cannot be split up to stay beneath the $100 maximum; Items such as jewelry, handbags, or sports and recreational equipment
- Exempt: School and art supplies with a purchase price of $100 or less per item, such as binders, backpacks, crayons, paper, pens, pencils, and rulers, and art supplies such as glazes, clay, paints, drawing pads, and artist paintbrushes
- Not exempt: School and art supplies individually priced at more than $100; Items that are normally sold together cannot be split up to stay beneath the $100 maximum
- Exempt: Computers for personal use with a purchase price of $1,500 or less; Laptop computers, if priced at $1,500 or less, also qualify as well as tablet computers
- Not exempt: Storage media, like flash drives and compact discs; Individually purchased software; Printer supplies; Household appliances
Food, Food Ingredients & Prepared Food – July 30 – August 5, 2021
Food and Food Ingredients
- Exempt: Liquid, concentrated, solid, frozen, dried, or dehydrated food or beverages for human consumption
- Not exempt: Alcoholic beverages, tobacco, candy, dietary supplements
- Exempt: Food that is sold in a heated state or heated by the seller. Food that contains two or more food ingredients mixed together by the seller for sale as a single item. Food that is sold with eating utensils, such as plates, knives, forks, spoons, glasses, cups, napkins, or straws provided by the vendor.
- Not Exempt: Food that is only cut, repackaged, or pasteurized by the seller
Gun Safes and Safety Equipment – July 1, 2021 – June 30, 2022
- Exempt: A locking container or other enclosure equipped with a padlock, key lock, combination lock, or other locking device that is designed and intended for the secure storage of one or more firearms.
- Exempt: any integral device to be equipped or installed on a firearm that permits the user to program the firearm to operate only for specified persons designated by the user through computerized locking devices or other means integral to and permanently part of the firearm.
It’s Not Too Late for Tax Planning for 2021 Even Though Half the Year Is Almost Gone
Whether you are filing as a corporation, partnership, LLC, or individual, you can benefit from doing some tax planning now. You must do some tax savings strategies for businesses, like timing income and expenses, before the end of the tax year. But you can do others any time before you file your return. So, you still have time. The tax professionals at PHB CPAs can advise you on various ways to reduce your tax bill for 2021.
6 Tax-Saving Tips for Businesses
The following tips are not intended to be tax advice. They are suggested topics you can discuss with your tax expert at PHB. Remember, for expert advice on business taxes Nashville turn to PHB.
- Apply for PPP forgiveness. Read more about this in our blog Applying for Forgiveness for PPP First Draw.
- Set up and fund a retirement plan. This can be for yourself or for your employees. Make sure it’s a qualified plan the IRS recognizes (IRA, 401(k), 403 (b), etc.). This will allow you to defer taxes on earnings until you withdraw the earnings.
- Take tax credits to lower income. This includes credits for hiring employees, going green, providing access for the disabled, and providing health coverage for employees.
- Take 100% Deduction for Business Meals. See our blog PHB Explains the 100% Deduction for Business Meals for details on this.
- Buy equipment/vehicles for depreciation deductions. For certain assets that you purchase, you can take an immediate deduction for the cost when you put it in service. The Tax Cuts and Jobs Act also allows for a 100% tax break for assets placed in service from September 27, 2017 through January 1, 2023.
- Time your business income and expenses: This involves prepaying some expenses to reduce your income for the year. For example, you could stock up on supplies that you know you will use in the next tax year.
Tax Deadline Extension to Aug. 2 for Victims of Tennessee Disasters
The IRS announced that victims of severe storms, straight-line winds, tornadoes and flooding that began in Tennessee March 25, 2021 now have until Aug. 2, 2021 to file various individual and business tax returns and make tax payments.
The IRS stated this week, “Those affected by severe storms, straight-line winds, tornadoes and flooding that reside or have a business in Campbell, Cannon, Cheatham, Claiborne, Clay, Davidson, Decatur, Fentress, Grainger, Hardeman, Henderson, Hickman, Jackson, Madison, Maury, McNairy, Moore, Overton, Scott, Smith, Wayne, Williamson, and Wilson counties qualify for tax relief.”
The declaration allows the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. Examples include, deadlines falling on or after March 25, 2021 and before Aug. 2, 2021 are postponed through Aug. 2, 2021. Also included is the May 17 deadline for filing 2020 individual income tax returns and paying any tax due. Taxpayers will have until Aug. 2 to make 2020 IRA contributions.
According to the IRS, “The Aug. 2, 2021 deadline applies to the first quarter estimated tax payment, normally due on April 15, and the second quarter payment normally due on June 15. It also applies to the quarterly payroll and excise tax returns normally due on April 30, 2021. In addition, it applies to tax-exempt organizations, operating on a calendar-year basis, that have a 2020 return due on May 17, 2021. Also, penalties on deposits due on or after March 25, 2021 and before April 9, 2021 will be abated as long as the tax deposits were made by April 9, 2021.”
If anyone impacted by the storms receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date that falls within the postponement period, the taxpayer is advised to call the telephone number on the notice to have the IRS abate the penalty.
The IRS will automatically identify taxpayers located in the covered disaster area and will apply filing and payment relief. Affected taxpayers who reside or have a business located outside the covered disaster area should call the IRS disaster hotline at 866-562-5227 to request this tax relief.
For more details on the tax relief, visit the IRS website.
Applying for Forgiveness for PPP First Draw
PHB CPAs is one of the best CPA firms Franklin, TN, has to offer. So, you know you can count on us for the latest information and advice concerning the SBA Paycheck Protection Program. If you have not applied for forgiveness for the first draw of the SBA Paycheck Protection Program … the clock is ticking.
Be Aware of Changes in Forgiveness Rules
Over time, the SBA has made significant changes to PPP forgiveness. One of the latest changes really simplifies applying for forgiveness if your loan is $150,000 or less. More expenses are now allowable too. These include:
- Mortgage interest and lease payments
- Utility costs
- Interest payments on any other debt obligations incurred prior to Feb. 15, 2020
- Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020
- Operations expenses including software, cloud computing, human resources and accounting needs
- Property damage due to public disturbances during 2020 not covered by insurance
- Supplier costs pursuant to a contract, purchase order or order for goods that was in effect prior to taking the loan and was essential to operations at the time. And supplier costs for perishable goods can be made before or during the life of the loan.
- Worker protection expenses like PPE and other adaptive costs to help comply with federal or state health and safety guidelines for COVID-19.
Know the Deadline for Applying for Forgiveness
Everyone’s deadline is different, and the disbursement date determines the deadline for the loan. However, before the borrower can even apply, all loan proceeds for which the borrower is requesting forgiveness must have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan, however, if borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.
Compute Your Deadline
Here is an example of how to compute the deadline date for a loan that had a disbursement date of 04/21/2020. If the client applies for a 24-week covered period, the covered period ends on 10/05/2020. Then the borrower has 10 months after the covered period ends to apply for forgiveness. If the borrower does not submit a loan forgiveness application to its lender by 08/05/2021, the borrower must begin making payments on or after 08/05/2021.
Instructions for Applying
Your lender should have instructions and videos to help you apply for forgiveness. You have probably already received several emails from your lender about this already. So, revisit the most current emails (older emails may not reflect the current changes), and see what the process is with your lender.
Tax Filing Deadline Change Information from PHB
As many of you have now heard, the IRS has extended the 2020 tax filing deadline by one month to May 17. This extension is an extension of both time to file returns and pay any balance due without additional penalty or interest. At this time, many states, including Tennessee, have not extended their due dates nor is there an extension on any 1st quarter 2021 estimated tax payments that might be due.
In light of the short notice of this change, we plan to continue to work to file all returns we can by the original April 15 deadline. We will honor our original cutoff date of March 24 to receive information and guarantee that we’ll complete the return before April 15. With the extension of time, we will also set a new cutoff date of April 23 to guarantee completion before the new May 17 due date. If needed, we can also file a regular extension prior to the new May 17 due date which will extend your return due date to October 15.
Finally, many of our staff members have scheduled time off post April 15 in anticipation of a normal filing season. We will honor these time off requests and while our office will not be closed, we will have various staff members out of the office during April and May. Please know that we will continue to work toward completing all returns in timely, accurate and efficient manner.
We will continue to monitor this situation and communicate any updates as they become available. We appreciate and thank all of you for being great clients.
PHB Explains the 100% Deduction for Business Meals
The Consolidated Appropriations Act-2021 signed into law on Dec. 27, 2020, creates a temporary 100% deduction for business meals provided by a restaurant. The 100% deduction can include food, beverages, taxes, and tips. It also covers delivered or carryout meals. The purpose of this provision in the Act is to spur businesses to buy meals in order to help the restaurant industry.
You can claim the deduction from January 1, 2021 through December 31, 2022, when it will expire. This is a welcome tax deduction for businesses that have typically only been able to deduct 50% of meals.
What Qualifies for a 100% Deduction for Business Meals?
The criteria for whether a meal is a deductible business expense still apply. These include:
- The taxpayer must be present at the meal.
- The meal must be provided to someone you would normally do business with.
(E.g., employees, prospective or current customers or supplier, etc.)
- “Business” must be conducted during the meal.
- The expense must be ordinary and necessary.
- Expenses must not be lavish or extravagant. (This criterion is based on the facts and circumstances not a dollar amount.)
Tracking Your Expenses Correctly
As you take advantage of this deduction, it will be important to keep track of your expenses correctly. You should separate meals from any entertainment costs. Entertainment costs are still non-deductible during this time period.
Our Experienced Accountants Provide the Business Tax Services You Need
Whether it’s federal or state, the tax laws are always changing. Our experienced business tax professionals stay on top of all the changes to keep our clients in compliance and maximize deductions. PHB CPAs is one of the most experienced accounting firms in Franklin, TN.
We provide a full range of business tax services, planning, and preparation for a variety of businesses in Franklin and Greater Nashville. Give us a call today at 615-750-5537.
As one of the top CPA Firms in Nashville we offer accounting services to individuals, businesses, and non-profits in Nashville, Franklin, Brentwood, Spring Hill, Murfreesboro and throughout cities in Middle Tennessee.
The Shuttered Venue Operators (SVO) Grant Program
The Shuttered Venue Operators (SVO) Grant program was established by The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, signed into law on December 27, 2020. The program includes $15 billion in grants to shuttered venues, to be administered by the Small Business Administration’s Office of Disaster Assistance.
Eligible applicants may qualify for SVO Grants equal to 45% of their gross earned revenue, with the maximum amount available for a single grant award of $10 million. $2 billion is reserved for eligible applications with up to 50 full-time employees.
Eligible entities include:
- Live venue operators or promoters
- Theatrical producers
- Live performing arts organization operators
- Relevant museum operators, zoos and aquariums who meet specific criteria
- Motion picture theater operators
- Talent representatives, and
- Each business entity owned by an eligible entity that also meets the eligibility requirements
Other requirements of note:
- Must have been in operation as of Feb. 29, 2020
- Venue or promoter must not have received a PPP loan on or after Dec. 27, 2020
Awards will be either for:
An eligible entity that was in operation on Jan. 1, 2019, the lesser of an amount equal to 45% of their 2019 gross earned revenue OR $10 Million.
An eligible entity that began operation after Jan. 1, 2019, the lesser of the average monthly gross revenue for each full month you were in operation during 2019 multiplied by 6 OR $10 Million.
Small businesses who have suffered the greatest economic loss will be the first applications processed under the following schedule:
Open only to small entities with up to 50 employees:
1st 14 days of grant awards
Entities that suffered a 90% or greater revenue loss between April 2020 through December 2020 due to the COVID-19 pandemic.
Next 14 days of grant awards
Entities that suffered a 70% or greater revenue loss between April 2020 through December 2020 due to the COVID-19 pandemic.
Beginning 28 days after First & Second Priority Awards are made
Entities that suffered a 25% or greater revenue loss between April 2020 through December 2020 due to the COVID-19 pandemic.
Available after First & Second Priority
Recipients of First and Second Priority round who suffered a 70% or greater revenue loss for the most recent calendar quarter (as of 04-01-21 or later)
Unrestricted; open to entities of any size:
|Unrestricted, non-priority round
Begins 61 days after initial grant awards
Eligible entities of any size that suffered a 25% or greater revenue loss
Funds may be used for specific expenses, which include:
- Payroll costs
- Rent payments
- Utility payments
- Scheduled mortgage payments (not including prepayment of principal)
- Scheduled debt payments (not including prepayment of principal) on any indebtedness incurred in the ordinary course of business prior to 02-15-20)
- Worker protection expenditures
- Payments to independent contractors (not to exceed $100K in annual compensation per contractor)
- Other ordinary and necessary business expenses, including maintenance costs
- Administrative costs ( fees and licensing)
- State and local taxes and fees
- Operating leases in effect as of 02-15-20
- Insurance payments
- Advertising, production transportation, and capital expenditures related to producing a theatrical or live performing arts production. (May not be primary use of funds.)”
In order to receive a grant, a business must be in a certain line of work. These businesses can be a for-profit organization, a nonprofit organization, or government-owned. They can be a corporation, a limited liability company, a partnership, or operated as a sole proprietorship.
The new law breaks qualifying recipients into four categories, with the first category containing subcategories.
Category 1: Live venue operators or promoters, theatrical producers, or live performing arts organization operators (collectively, “live venue operators”)
This category contains both businesses that organize, promote, produce, manage or hosts live performances and those that sell tickets to performances to live venues. Live performances, for these purposes, includes concerts, comedy shows, theatrical productions, or other events by performing artists. Let’s break the two subcategories down separately…
Organize/Promote/Produce/Manage/Host Life Performances
To meet this definition, the business must have three characteristics.
- It must impose a cover charge through ticketing or a front door entrance fee.
- Performers must be paid in an amount that is based on a percentage of sales, a guarantee (in writing or standard contract), or another mutually beneficial formal agreement, and
- Not less than 70% of the earned revenue of the business is generated through, to the extent related to live events, cover charges or ticket sales, production fees or production reimbursements, nonprofit educational initiatives, or the sale of event beverages, food, or merchandise.
In addition, a ‘‘live venue operator or promoter, theatrical producer, or live performing arts organization operator” includes a business that sells tickets to the public — an average of not less than 60 days before the date of the event — to live concerts, comedy shows, theatrical productions, or other events by performing artists.
Once again, to qualify, the performers for these live events must be paid in an amount that is based on a percentage of sales, a guarantee (in writing or standard contract), or another mutually beneficial formal agreement.
Category 2: Relevant Museum
A relevant museum is a ‘museum’ as defined in section 273 of the Museum and Library Services Act (20 U.S.C. 9172). I have no idea what this means, but if you’re reading this and have a vested interested in this definition, you probably do. It does NOT include, however, any museum that is organized as a for-profit entity.
Category 3: Motion Picture Theater Operator
This category includes a business that owns or operates at least one place of public accommodation for the purpose of motion picture exhibition for a fee. In simpler terms, a movie theater.
Category 4: Talent Representative
Finally, a “talent representative” is eligible for a grant. This includes an agent or manager that does the following three things:
- As not less than 70% of its business, is engaged in representing or managing artists and entertainers;
- Books or represents musicians, comedians, actors, or similar performing artists primarily at live events in venues or at festivals; and
- Represents musicians, comedians, actors or similar artists that are paid in an amount that is based on the number of tickets sold or a similar basis.
Once it is determined that a business is a live venue operator or promoter, theatrical producer, or live performing arts organization operator (again, collectively, a “live venue operator”), a relevant museum operator, a motion picture theatre operator, or a talent representative, the business must then meet the following SEVEN requirements:
- It must have been fully operational on February 29, 2020;
- Had gross revenue during the 1st, 2nd, 3rd, or 4thquarter of 2020 that was less than 75% of what it was for the same quarter in 2019;
- As of the date of any grant:
- For “live venue operators,” the business is or intends to resume its business of organizing, promotion, producing, managing or hosting future concerts, comedy shows, theatrical productions, or other events;
- For motion picture theater operators, it is open or intends to reopen for the primary purpose of public exhibition of movies,
- For relevant museum operator, it is open or intends to reopen, or
- For talent representatives, it is CURRENTLY representing or managing artists and entertainers.
- The business cannot have ANY of the following characteristics: it cannot be publicly traded or have received more than 10% of its revenue during 2019 from federal funding. Likewise, the business cannot be majority owned by or controlled by an entity with either of those characteristics.
- The business cannot have MORE THAN TWO of the following characteristics:
- Locations in more than one country,
- Locations in more than 10 states, or
- More than 500 employees as of February 29, 2020.
- NO STRIP CLUBS, and
- Lastly, the business cannot receive a Paycheck Protection Program loan —either round 1 or the new second round — after December 27, 2020.
Next, there are requirements for the types of venues involved in the business.
For a live venue operator, the venues at which the business promotes, produces, manages or hosts events (or for a talent representative, the venues at which the artists represented perform), must have the following characteristics:
- A defined performance and audience space;
- Mixing equipment, a public address system, and a lighting rig;
- Engages one or more individual to carry out at least two of the following roles: sound engineer, booker, promoter, stage manager, security personnel, or box office manager;
- There is a paid ticket or cover charge to attend most performances and artists are paid fairly and do not play for free or solely for tips, except for fundraisers and similar charity events;
- For a venue owned by a non-profit, the events are produced and managed by paid employees rather than volunteers; and
- Performances are marketing through listings in printed or electronic publications, on websites, by email, or on social media.
A motion picture theater must have:
- At least one auditorium that includes a motion picture screen and fixed audience seating,
- A projection booth or space containing not less than one motion picture projector,
- A paid ticket charge,
- The movies must be marketed through showtime listings in printed or electronic publications, on websites, by email, or on social media.
A museum must have:
- Indoor exhibition spaces that have been subjected to pandemic-related occupancy restrictions; and
- At least one auditorium, theater, or performance or lecture hall with fixed audience seating and regular programming.
Use of Funds
The grant dollars must be used for costs incurred from March 1, 2020 through December 31, 2021 (for initial grants, or as late as June 30, 2022 for supplemental grants). If not expended by the relevant deadline, the funds must be returned within 1 year after the date of disbursement of the grant. Thus, for businesses borrowing this month, any amount not spent by December 31, 2021 would need to be returned in January of 2022. Unused supplemental grants must be repaid within 18 months of the date of disbursement.
The grants must be used for certain expenses. Eligible expenses include payroll costs, mortgage interest, rent and utilities (on obligations that existed prior to February 15, 2020), and covered worker protection expenses as defined in the Paycheck Protection Program. In addition, the funds may be used to make payments made to independent contractors (not to exceeds $100,000 in annual compensation to any one service provider), or for maintenance expenses, administrative costs, state and local taxes, operating leases, insurance premiums, advertising, production transportation, and certain capital expenditures. The funds CANNOT be used to purchase real estate, to pay loans originating after February 15, 2020, to invest or relend funds, or for contributions to a political party.
Finally, the latest stimulus bill makes clear that 1) receipt of the grant is not taxable; rather, the grant represents tax-exempt income, and 2) any expenses paid with the grant money is fully deductible.”
Research and blog written by PHB employee, Binh Ngo
Employee vs. Independent Contractor?
The Labor Department released the Final Rule on Wednesday to loosen regulations for defining an employee vs. an independent contractor. The survival of the rule under the Biden administration remains to be seen. Get the full report from the Department of Labor here: Employee vs. Contractor